LAW ON SALE OF GOODS: CONDITIONS AND WARRANTIES

By- Reethu Rajam

Introduction

The Indian Sale of Goods Act is an act that was implemented during the days of the British Raj. The sale of goods act came into existence on 1st July 1930. The act was renamed to the Sale of Goods Act during 1930.

It consists of features such as rights and duties of a buyer and a seller, transfer of ownership of goods, conditions and warranties implied under a contract, remedies of breach of contract, etc.

Essentials of a Contract

The first essential is that the contract must be valid. The ingredients of a valid contract are free to consent, consideration, competencies of the parties, lawful object, and lawful consideration.

The second element, i.e. consideration, means that the contract of sale would be between two parties. The two parties would be a buyer and a seller.

According to Section 2(1) of The Sale of Goods Act, 1930, a ‘buyer’ is a person who buys or agrees to buy goods.

According to Section 2(13) ‘seller’ is a person who sells or agrees to sell the goods. The third essential is the subject matter. For a sale to happen there must be good.

The object for sale must be lawful. Under Section 2(7) of The Sale of Goods Act, goods can mean every kind of movable property such as stock, share, or things attached to or forming part of the land.

The fourth element for a sale is the price. According to Section 2(10), there should be some price for the subject matter. The last essential element is the transfer of ownership. When a process of the sale happened, the ownership of the good is transferred from the seller to the buyer.

The Rule of Caveat Emptor

Caveat Emptor’ means ‘let the buyer beware’. Section 16 states that when a buyer purchases a product from the seller the responsibility of their choice lies on the buyer themselves. We can understand the case with an example.

Let us say ‘A’ the seller makes his product available in the market. The buyer ‘B’ checks all the options available to him and makes a choice. The product turns out to be defective.

The doctrine states that the seller will not be responsible as the buyer himself made a choice, and therefore he is responsible for the choice he made. However, there are exceptions to the doctrine:

  1. When the buyer informs the seller the purpose of him buying the goods, or
  2. When the buyer buys the goods that are based on the description, or
  3. When the buyer buys the goods after reviewing the sample product of the buyer, or
  4. When the seller sells the product by fraud or misrepresentation.

Transfer of Title

According to Section 30(1) of the Act, when the seller has sold the goods to the buyer but the ownership of the goods remains with the seller himself and during that time he sold the goods to someone else and that person purchases the good without any notice of past sales, he would have to give the title to them.

According to Section 30(2) of the Act, if the buyer sells the goods that he purchased from the seller but the actual sale has not been made, if the buyer to whom goods have been sold again have purchased the goods without any notice, he gets the possession and ownership.

For example, ‘A’ took a phone from ‘B’ and said that he would pay the installment.  After a few installments ‘A’ sold the phone to ‘C’. In this case, ‘A’ can recover the phone from ‘C’.

Warranties of Sale

A warranty is said to be a stipulation that is collateral to the main purpose of the contract. The breach of which gives permission to claim for the damages, but it does not give the right to reject the goods. There are two types of warranties – express and implied.

Express warranty is when the contract expressly provides for it. Both parties decide upon the number of express warranties. Implied warranties are when the law incorporates into a contract of sale. When there are no express representations, the law imposes certain representations. 

Delivery of Goods

Section 33 states that the delivery of the goods can be made by putting the goods in the ownership of the person or any person who is authorized by the buyer. They are of 3 types: Actual, Symbolic, and Constructive. 

Unpaid Seller & His Rights

According to Sec. 45(1)(b), a Seller who has not been paid, fully or partially or one who has received payment in the form any negotiable instrument that has been dishonored or a bill of exchange is called an unpaid seller.

The Act provides unpaid seller rights. The first right is the unpaid seller’s lien. The seller’s lien in the right to retain the goods until the whole price has been paid.

The second right is the Right of Stoppage of Goods in Transit. The Unpaid seller has the right to stop the transaction while in the transaction to regain the possession and retain them until the full amount is paid.

The third right is the right of resale. An unpaid seller can resell the good under three circumstances that are when the goods are perishable in nature when the sellers reserve the right of resale and the buyer commits a default in paying the amount, and when the seller has exercised the right of lien or stoppage in transit and gives the buyer notice.

The next right is the right of withholding delivery. When the property in the Goods has not been passed to the buyer. Other rights suit for the price (Section 55), suit for damages (Section 56), and suit for interest Section 61(2).

Remedies for Breach of Contract

  1. Suit for Damages for Non-Delivery – When the seller refuses to deliver the goods to the buyer, the buyer can sue the seller for non-delivery.
  2. Suit for Price – When the buyer had paid the price in advance and has not delivered to him, he can recover the amount paid.
  3. Suit for interest – The buyer may recover interest or special damages.
  4. Suit for Specific Performance – When the goods are ascertained a buyer may sue the seller for specific performance.
  5. Suit for Breach of Warranty– Where there is a breach of warranty by the seller or compelled to treat the breach of warranty, the buyer cannot reject the goods.

Case Laws

Chunna Mal Ram Nath v. Mool Chand Ram Bhagat[1]

The Plaintiff entered into a contract for taking delivery from the defendant. The goods were packed in wooden boxes. They were to be later secured from London. The British Government prohibited the supply of such goods in wooden boxes.

Therefore, the defendant offered to supply in bales to which the plaintiff refused. Later, the plaintiff claimed damages for non-delivery. The issue of the case was if the plaintiff can claim for compensation.

The court observed that the plaintiff has put an end to the contract and the plaintiff himself was the one who was refusing to take deliveries, therefore, no claim for damages could be brought against the defendant.

Santosh Kumar Chopda v. State of M.P[2]

In this case, Section 7 of the Sale of Goods Act, 1930 was interpreted and it was held that a bidder cannot question the validity of an auction sale after making a bid on the ground that the goods sold at the auction were damaged, as it is solely the responsibility of the bidder to inspect the good before making the bid.

Rowland v. Divall[3]

It was held that a buyer of a motor car, who was deprived of the same owing to the seller’s want of title was entitled to recover the full price from the seller even though he had to use the car for several months.

Stevenson v. Rogers[4]

It was a suit filed by the plaintiff for breach of implied condition as to the merchantable quality of the fishing vessel sold by the defendant. The contention of the defendant was that it was not a ‘Sale of Goods’ in the course of business in terms of Section 14(2) of Sale of Goods Act, 1979.

It was held that this contention is not tenable since the said Act aims to give wider protection to buyers and therefore the sale is in business.

Marvin v. Wallis[5]

‘A’ sold his horse to ‘B’ and after the sale, obtained the loan of the horse for a week to which ‘B’ assented and left the horse with ‘A’. It was held that there has been a delivery to ‘B’.

Conclusion

Law relating to the sale of goods is present in the Sale of Goods Act, 1930. This act is for the most common commercial transactions. Knowledge regarding this act is a must. 


[1] (1928) 30 BOMBLR 837

[2] 2003 (2) Civil LJ 378 (MP)

[3] 1923 (2) KB 500

[4] 1999 (1) All ER613 (C.A)

[5] 1856 (119) ER 1035

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